What is a key feature of loans with adjustable rates in insurance policies?

Loans with adjustable rates in insurance policies often base interest rates on an index, and one common index used is Moody's corporate bond yield average. This method of determining interest rates allows the cost of borrowing to fluctuate in response to market conditions, making it essential for policyholders to understand how the rate will change over time.

By using a dynamic index like Moody's, the interest rates can adjust periodically, reflecting current economic conditions and providing a potentially lower interest cost if market rates decrease. This feature is what sets adjustable-rate loans apart from fixed-rate loans, which have consistent payments determined at the outset.

Other options do not characterize adjustable-rate loans accurately. Fixed payments, permanence of terms, and high costs generally describe features of other loan types or arrangements rather than the nature of adjustable-rate loans.